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RESEARCH PAPERS
Managing tenant mix in
shopping centres in the
United Kingdom
Mary Lou Downie, Peter Fisher andCheryl WilliamsonNorthumbria University, Newcastle upon Tyne
September 2002
Volume 4, Number 14
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Jose Luis Caramelo GomesEscola Superior de ActividadesImobiliarias
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Neil CrosbyUniversity of Reading
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David LewisHarper Adams UniversityCollege
Colin LizieriUniversity of Reading
Jorge LopesInstituto Politecnico deBroganca
John MacFarlaneUniversity of Western Sydney
David MackminSheffield Hallam University
Nick MillardBruton Knowles
John MoohanNottingham Trent University
Bev NuttUniversity College London
Jacob OpadeyiUniversity of the West Indies
Martin PearsonUniversity of Northumbria atNewcastle
Steve PearsonSouth Bank University
Srinath PereraUniversity of Moratuwa
John PerryUniversity of Birmingham
Martin SextonUniversity of Salford
Li ShirongChongqing Jianzhu University
Martin SkitmoreQueensland University ofTechnology
Martin SmithUniversity of Nottingham
Alan SpeddingUniversity of the West ofEngland
Peter SwallowDe Montfort University
Julian SwindellRoyal Agricultural College
Carlos Torres FormosoNORIE/UFRGS
Thomas UherUniversity of New South Wales
Tony WalkerHong Kong University
Ian WatsonUniversity of Salford
www.rics-foundation.org RICS Foundation • 3
Contents
Introduction 5
The concept of tenant mix 5
Comparison goods 6
Convenience goods 6
Anchor tenants 6
Main space users 7
What is expected of tenant mix? 7
Attracting and retaining shoppers 7
Differentiating between shopping centres 8
Creating an exciting shopping experience 8
Pedestrian flow 8
Managing retail tenant mix 9
The pressure for tenant mix change 9
Management structures 9
Monitoring tenant mix 9
Proactive management 9
Lease management case law 10
Lease length and security 10
Research methodology 11
Research results 12
Evolving tenant mix 12
Location of stores 13
Policies for managing tenant mix 14
Monitoring tenant mix effectiveness 15
Implementing tenant mix policy 16
Tenant mix obsolescence 17
Summary and conclusions 19
Summary 19
The future direction of tenant mix management 20
Future research 20
Bibliography
Mary Lou Downie, Peter Fisher and Cheryl Williamson
Northumbria University, Newcastle upon Tyne, United Kingdom
Abstract
Contact
The variety and location of retailers within a group of shops, known as tenant mix , has been identified as a
critical factor in the success or failure of purpose-built shopping centres. There have been numerous studies
made of the impact tenant mix can have on profitability, but less is known about the way in which landlord-
investors approach the allocation of leases within shopping centres. This study aims to increase understanding of
how they perceive and manage tenant mix.
The report is based upon findings from in-depth interviews with investor-landlords, asset managers and letting
agents, together with a larger questionnaire survey of asset managers and investors. The research is supported by
a comprehensive review of existing literature.
The report finds that:
¥ In terms of maintaining an effective tenant mix, landlords consider the anchor stores - those large enough and
established enough to be shopper destinations in their own right - to be the most crucial factor.
¥ When deciding upon the location of tenants and shop units within a centre, interview and survey respondents
prioritise whole centre issues such as pedestrian flow over retailer micro-location
¥ In a majority of cases tenant mix policies are informal, despite the need to produce written evidence of such
policies as a defence against undesirable lease assignments by tenants.
¥ Turnover indices and shopper surveys are the main methods used to monitor the success of tenant mix policies.
Monitoring is usually at sufficiently frequent intervals to highlight any changes in circumstances. However,
policy reviews are more irregular and dependent upon stimuli such as tenant change, suggesting that
monitoring is not necessarily used to initiate change where necessary.
The study concludes with recommendations on how shopping centre managers can make improvements to
tenant mix policies. Such changes would ensure that shopping centres are more sensitive to consumer trends,
maintaining an evolving tenant mix through proactive, responsive and flexible management.
Received February 2001
Revised and accepted August 2001
School of Built Environment
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Ellison Building
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T: +44 (0)191 227 4722
F: +44 (0)191 227 3167
E: peter.fisher@unn.ac.uk
E: marylou.downie@unn.ac.uk
E: cheryl.williamson@unn.ac.uk
Acknowledgements
The British Council of Shopping Centres
The interviewees listed in Appendix A
The respondents listed in Appendix B
Managing tenant mix in shopping centres in the UnitedKingdom
www.rics-foundation.org RICS Foundation •5
Tenant mix has been identified as a critical factor in the success
or failure of purpose-built shopping centres (McGoldrick 1992)
(hereafter occasionally referred to solely as centres ). Within
the literature specifically addressing tenant mix, various
approaches have been taken. Abratt et al (1985), Greenspan
(1987) and Bruwer (1997) provide descriptions of the principles
upon which tenant mix should be based, with the objective of
advising shopping centre owners on how to maximise the
success of their assets. CALUS (1975), Kirkup and Rafiq
(1994) and Bruwer (1997) offer case studies of centres,
analysing the strengths and weaknesses of their individual
tenant mixes. Brown (1993) includes a discussion of tenant mix
in his review of the theoretical bases of retailers location
decision-making at the micro level, identifying both demand
and supply-side determinants. He considers the shopping centre
landlord s creation and management of tenant mix as the most
important supply-side influence on retail location at the micro
level. Despite this important role, little systematic research has
been conducted into landlord or investor perceptions of tenant
mix and methods of managing it. According to Brown (1993),
this is part of a general lack of research into the issue of retail
micro-location.
This study attempts to increase understanding of how investor-
landlords perceive tenant mix and particularly of how they
manage it. Shopping centres inevitably pass from the status of
new assets, designed to accommodate state-of-the-art retail
practice, and decline into degrees of functional obsolescence. In
order to maintain asset value, landlords need to monitor and
adjust the tenant mix, but are constrained by the inertia of
existing physical and legal arrangements.
The research was carried out by means of in-depth interviews
with investor-landlords, their asset managers and letting agents,
followed by a larger questionnaire survey of asset managers and
investors. A review of the existing literature in Sections 2, 3 and
4 precedes a description of the methodology in Section 5 and a
report of the results in Section 6.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Introduction
1The concept of tenant mix
2Abratt et al (1985) provide probably the most comprehensive
list of the objectives and principles of tenant mix available.
They rely on the definition provided by Kaylin (1973):
"Tenant mix refers to the combination of business
establishments occupying space in a shopping centre to
form an assemblage that produces optimum sales, rents,
service to the community and financiability of the
shopping centre venture."
Greenspan (1987), writing from the perspective of a leasing
manager, describes a good tenant mix as a variety of stores that
work together to enhance the centre s performance and operate
successfully as individual businesses.
These descriptions of tenant mix stress the underlying objective
of maximising shopping centre profitability, and are therefore
investor-orientated. They identify the key to maximising
profitability, which is maximisation of sales through provision
of the optimum service to the community. The concept of
tenant mix design therefore involves provision of a range of
merchandise and services, carefully chosen to appeal to the
catchment shopping population, as described by Bruwer
(1997). These services may include restaurants and other
catering outlets, and increasingly they also include leisure
facilities such as cinemas (Abratt et al 1985; Yap 1996;
Roberts and Melvin 1999). In discussions of tenant mix, the
provision of different types of merchandise is almost always
replaced by a proxy — namely various categories of retailer — in
order to classify the merchandise on offer. Classifications focus
on characteristics such as price and quality, appeal to different
lifestyle groups, and service levels.
Kirkup and Rafiq (1994) provide a measurement-orientated
description of tenant mix as:
...a combination of factors, including the proportion of
space or number of units occupied by different
retail/service types, as well as the relative placement of
tenants in the centre .
massive swing towards domination of comparison shopping by
multiple retailers, increasing their share by over 40% since the
1960s. Teale (1997) suggests this results from the multiples
taking the bulk of space in new shopping centre developments
over that period.
As Nelson (1958) pointed out, the mutual proximity of
compatible retailers, as well as their business volumes, are
important in raising sales through comparison retail clustering.
The concept of comparison shopping used in tenant mix
management therefore has to include not only the selection of
tenants, but their relative locations within the centre.
CONVENIENCE GOODS
Convenience goods are described by Northern and Leonard
(1977) as those purchased regularly, so that convenience of
location, selection and buying are important. The group
includes food, newspapers and drinks — products typically sold
from local corner and parade shops, supermarkets and unit
shops, some of which are situated in shopping centres.
Steventon and Wood (2000) note that convenience shopping is
more important in smaller shopping centres. Whereas only six
of the top 200 UK shopping centres are convenience dominated,
this type of use dominates most schemes outside the top 400.
The relative importance of convenience and comparison
shopping in the design and management of tenant mix therefore
varies according to the size and nature of the shopping centre.
ANCHOR TENANTS
Analysts of the ways developers and investors let shopping
centres, and thereby create the initial tenant mix, agree that the
initial critical lettings are to one or more anchor tenants
(CALUS 1975; Abratt et al 1985; Greenspan 1987; Brown
1993; Bruwer 1997; Kirkup and Rafiq 1994; Roberts and
Melvin 1999). The anchor store is always relatively large and
sufficiently well regarded, either in terms of quality, price or
function, to be a destination in its own right. Other outlets will
cluster about it and feed off the shopping traffic it generates.
The choice of anchor tenants is therefore vital to the success of
the overall tenant mix. The location of anchors within the centre
creates pedestrian flows. By careful management, these can
maximise sales potential and therefore rental income from the
available floorspace, attracting shoppers to all areas of the
centre.
RICS Foundation • 6www.rics-foundation.org
Brown (1993) suggests that although there are many possible
classification systems available for these retail/service types,
and some have been in use for long periods, they are all flawed.
In addition he believes that the choice of classification
influences our analysis of the tenant mix and of the underlying
forces which bring it about. This aspect of the subject makes it
particularly resistant to analysis.
The definitions above draw attention not only to the mix of
retail types offered, but also to the relative placement of the
retailers.
COMPARISON GOODS
Northern and Leonard (1977) identify comparison goods as
those purchased at irregular intervals, for long-term use, with
suitability, quality, price and style being important factors in
their selection. The group is epitomised by fashion and
footwear, jewellery, and expensive household equipment. The
reason for the increase in sales when comparison goods retailers
cluster close together is their attraction to shoppers wanting to
compare similar goods before making a purchase. Nelson
encapsulated the effects of comparison shopping when he stated
his law of compatible retailing in 1958:
"Two compatible businesses located in close proximity
will show an increase in business volume directly
proportionate to the incidence of total customer
interchange between them, inversely proportionate to the
ratio of the business volume of the larger store to that of
the smaller store and directly proportionate to the sum of
the ratios of purposeful purchasing to total purchasing in
each of the two stores."
There are many studies of patronage behaviour which draw on
psychological and social theories of behaviour, largely in US
and Canadian literature. These confirm the importance of
comparison shopping as a motivation for visiting shopping
centres and this has long been held to be one of the primary
reasons for designing and managing tenant mix (Reidenbach et
al 1984). The current importance of comparison shopping for
shopping centre investors returns is demonstrated by the
following figures from Steventon and Wood (2000): comparison
goods account for 72% of expenditure in the 400 leading UK
shopping centres and an even higher rate of 87% of expenditure
within the top 18 centres; of the top 100 UK centres, 91 are
comparison dominated, i.e. with more than 55% of their sales
coming from comparison goods. Hillier Parker (1997) noted a
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
RICS Foundation •7www.rics-foundation.org
MAIN SPACE USERS
The choice of anchor tenants determines which Main Space
Users (MSUs) can be attracted to the next highest size range of
units. These are usually smaller than the anchor store and some
may have sufficient appeal to shoppers to be destinations, but
many will function only as part of a comparison or convenience
cluster. The anchor and its satellite MSUs together determine
the attraction of the centre to the many other retailers needed to
create the full range of comparison and/or convenience
merchandise, which can maximise the appeal of the centre to
the shopping catchment.
It is clear from the literature that considerable thought is
devoted to the initial letting of shopping centres, building up
from costly demographic or psychographic study of the
catchment population to the creation of a tenant mix design
(Greenspan 1987; Roberts and Melvin 1999). This acts as a
basis for approaches by letting agents to a hierarchy of anchor
tenants, leisure and service providers, MSUs, lesser tenants, and
operators of barrows and kiosks. A study of the tenant mix
literature reveals a wide range of benefits that an investor-
landlord might expect to gain from this expenditure of effort
and resources. These are set out below.
ATTRACTING AND RETAINING SHOPPERS
Perhaps the simplest expectation is that a centre should attract
as many shoppers as possible. Gravity models emphasise the
direct relationship between shopping centre size and a centre s
potential attraction to shoppers. However, within the constraints
of a centre s size, Abratt et al (1985) suggest that the
"maximum attractiveness to the population of that specific
trading area" depends on creating sufficient diversity in the
tenant mix. This must, however, be part of a coherent
merchandise mix, described by Abratt et al (1985) as "a
balanced diversification of shops offering a wide range of
products and services". There are obvious space limitations on
centres abilities to offer a wide range of merchandise, leading
to choices in aspects of tenant mix such as the balance of
convenience and comparison goods and the range of price and
quality (CALUS 1975). Bellenger et al (1977) found that the
variety of tenant mix influences shoppers selection of a
shopping centre, and Stoltman et al (1991) showed that it
influences the frequency of shopping trips.
The choice of tenant mix should satisfy any unmet demand for
goods and services within a centre s catchment area (CALUS
1975). Shoppers surveyed by Reidenbach et al (1984) were
motivated to shop at centres outside their home retail trade area
primarily by perceived inadequacies in the assortment of goods
on offer locally. A centre providing for shortfalls in the range of
goods in an area can therefore retain local expenditure and
capture sales from competing centres.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
What is expected of tenant mix?
3
RICS Foundation • 8www.rics-foundation.org
DIFFERENTIATING BETWEEN SHOPPING
CENTRES
Abratt et al (1985) state that tenant mix should create a specific
image for the centre, and position it in relation to competing
retail centres. The need to differentiate a centre from its
competitors has grown as their numbers have increased (Yap
1996). Because anchor store lettings in a centre determine the
feasible overall tenant mix, they are influential in determining
the range of merchandise which can be offered to meet the
catchment s demand and position the centre in the retail
hierarchy. Roberts and Melvin (1999) describe the
psychographic approach to merchandise selection behind the
design of tenant mix at Bluewater, opened in 1999 close to
London s outer ring road. This resulted in a tenant mix designed
to meet comparison shopping demand at the medium to high
end of the quality and price range, differentiating the centre
from Thurrock Lakeside, another large regional centre nearby.
However, the role of anchor stores is even more important than
this. Finn and Louviere (1996) found that anchor stores exert a
dominant influence on shoppers image of any shopping centre
and thereby on centre patronage. Darden and Babin (1994)
show that this influence is exerted not only by an anchor s
functional characteristics, but also by its affective qualities,
which together contribute to its image in shoppers minds.
Positioning a shopping centre in the retail hierarchy is therefore
largely achieved through anchor store lettings.
The overall merchandise provision is dependent on initial
anchor store lettings, but choices of tenants as MSUs and for
other units contribute to this objective. It has been suggested
that the inclusion of a higher proportion of independent traders,
rather than the ubiquitous uniformity of the national multiples,
can contribute to increased differentiation between centres
(Kirkup and Rafiq 1994). However, a study of five major UK
shopping centres suggests that this effect is not fully utilised by
asset managers (French 2000). Oswald (1999) suggests that
over a centre s life individuality will decrease as local, niche
and start-up retailers fail to survive the rent review process,
being unable to match the rents paid by multiples. He suggests
that rents should be tailored to the tenant s retail use, in order to
encourage retailer diversity and enliven the mix offered to
shoppers.
CREATING AN EXCITING SHOPPING
EXPERIENCE
Shoppers can be attracted to a shopping centre by many factors.
The investor-landlord s objective is for them to purchase goods
and services, boosting retailers turnover and the share that they
can take as rent. However, shoppers motivations for visiting
the centre may involve socialising with family and friends,
browsing to gather information on possible future purchases and
relieving boredom, rather than making purchases of goods or
services. As Bloch et al (1994) comment, shopping centres have
"transcended the role of purchase site to become a centre for
many possible activities".
The tenant mix can increase the amount of spending by
addressing these non-shopping activities. Common methods are
to provide opportunities for eating and leisure activities. By
providing places to rest and eat, shoppers can be persuaded to
stay longer in the centre, increasing the chance that they will
spend. Wakefield and Baker (1998) investigated the relationship
between excitement or emotional arousal of shoppers and
their patronage behaviour. They found that tenant variety had a
strong influence on shoppers levels of excitement, which are
positively linked to their levels of spending, desire to stay at the
centre and intention to return in the future. In this study tenant
variety measured not only the variety of retail stores, but also
food services and entertainment. Court (2000) develops the idea
as fun retailing and tracks its implementation over recent years
via the inclusion in shopping centres of cinemas and food
courts. Bluewater s themed leisure villages are a recent
example, providing break out areas targeted at different
customer groups, including restaurants, cafes, cinemas, cr ches,
a children s grotto and exhibition areas. Although the
excitement-inducing features of tenant mix were previously
associated with non-store food and leisure elements, Court notes
that excitement is now expected to be provided by stores
themselves, through aspects of their design, ambience and
multimedia customer entertainment.
PEDESTRIAN FLOW
Lists of tenant mix rules identify the importance not only of
selecting a balanced variety of tenants, but of locating them
carefully within the centre, both in relationship to the centre s
layout and in relationship to each other (CALUS 1975). Abratt
et al (1985) express the objectives as "creating maximal
pedestrian flow in order to ensure there is a 100% location for
all tenants" and "a logical layout of shops", and suggest that
developers tend to neglect this aspect of mix. Several authors
note the problems of achieving optimum location plans, due to
market weakness and larger retailers demanding specific
locations (Abratt et al 1985; Kirkup and Rafiq 1994; Brouwer
1997). The location of anchor tenants and MSUs are critical
decisions, drawing people through the centre from the access
points, and avoiding areas of low pedestrian flow where few
retailers can thrive.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
tenant mix policy: the investor/developer may engage an asset
manager, who in turn may appoint an on-site centre manager,
who is the day-to-day point of contact with the retail occupiers.
One or more letting agents may also be involved. All three
management layers, and potentially others, are involved to a
greater or lesser extent in the management of tenant mix.
MONITORING TENANT MIX
The prerequisite for successful management of retail tenant mix
in any centre is to monitor its performance - that is, the level of
profit achieved by its retailers and the implications for the
centre s rental income and capital value. Greenspan (1987)
advocated the constant monitoring of sales performance,
competition and demographics for this purpose. She suggested
continual manager-tenant communication to allow managers to
understand tenants business needs. In the USA the use of
turnover rents informs and facilitates this dialogue, but in the
UK the usual market rent practice is a barrier to such necessary
communication. With the exception of Greenspan (1987), who
describes demographic monitoring, the literature says little
about the methods and practice of monitoring retail tenant mix
evolution, diagnosing problems and spotting opportunities.
The most obvious indicator of the need for tenant mix change is
the failure of a retailer. This may result in an unexpected
vacancy and a request to assign or sub-let the lease. In a strong
retail market the landlord is likely to benefit from re-letting a
vacant unit and has no interest in keeping a retailer whose
business is not thriving. In a weak market, however, the
landlord may protect its income stream by enforcing the
retailer s covenant to pay rent until the end of the lease.
Tenant mix normally changes incrementally over the life of a
centre (Thomson 1999) in response to vacancies on liquidation,
at lease termination, by agreement with the landlord or by
assignment. Each vacancy presents an opportunity for the
landlord to modify the tenant mix within the constraints of the
market and the characteristics of the vacant unit (Kirkup and
Rafiq 1994).
PROACTIVE MANAGEMENT
Greenspan (1987) advocates proactive management of tenant
mix, rather than relying on changes instigated by retailers. This
can involve negotiations for surrender of leases, possibly
involving a payment to the retailer. More radically a centre may
be wholly or partially refurbished and the tenant mix
repositioned towards a changed demographic or competitive
environment.
RICS Foundation •9www.rics-foundation.org
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
THE PRESSURE FOR TENANT MIX CHANGE
Retail formats are continually changing and, with the growth of
retailing via the internet and interactive television, can be
expected to do so at an accelerating rate. Greenspan (1987)
stresses that a successful tenant mix needs to respond to such
changes, requiring "continuous monitoring, evaluation and
action on the part of the manager". Kirkup and Rafiq (1994)
suggest three reasons for the increased difficulty in maintaining
a successful tenant mix:
¥ heightened competition between centres, arising from their
proliferation and consumers greater mobility, has
created pressures for differentiation between centres by
means of tenant mix
¥ a difficult retail market, such as that suffered in the UK in the
early 1990s and again in middle-market fashion in
1999/2000, will result in falls in retailers space needs and a
reduction in landlords flexibility in managing tenant mix
¥ ever-changing demographics, fashion and consumer demand,
which lead to the decline of some older retailers and the brisk
expansion of new ones, often with different space
requirements
MANAGEMENT STRUCTURES
Peters (1990) suggested that tenant mix can evolve
organically through the operation of market forces;
unsuccessful retailers leave and are replaced by others.
Alternatively, the mix can be planned and actively managed.
Whereas most commentators assume the centre asset manager
is responsible for this process, Peters believes that:
"...notwithstanding the centre manager s
responsibilities...it is the ultimate responsibility of the
retailers in a centre to govern retailer mix. Indeed they
are probably the only body...who are fitted to do so."
He suggests that tenant associations are well placed to drive
tenant mix change, but appears to be alone in this view.
Prendergast et al (1996) investigated tenant-manager
relationships in New Zealand and found, from a sample of 15
shopping centres, that all the centre managers were located on
site or close by. Kirkup and Rafiq (1999) found more complex
management structures operating for UK shopping centres. The
UK model has up to three layers of management involved in
Managing retail tenant mix
4
RICS Foundation • 10www.rics-foundation.org
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
This may also involve the merger or subdivision of units to
meet the new retail requirements (Knight Frank 1997). Lettings
will normally be at market rents, but Greenspan (1987), Yap
(1996) and Bernard (2000) all note instances of higher offers
being forgone in order to achieve the desired tenant mix.
Greenspan (1987) advocates the gradual evolution of tenant
mix, since shoppers are unsettled by instability or failure to
find the retailer they expect within a particular centre. Although
Bruwer (1997) suggests shopper surveys for designing initial
tenant mix, he is alone in doing so. This may be because of
suspicions that stated shopping intentions might not be matched
by actual shopping behaviour. There are no suggestions in the
literature that shopper surveys should be used as a means of
monitoring tenant mix success or identifying the need for
change.
LEASE MANAGEMENT CASE LAW
Landlords and their agents have evolved management tools to
deal with these circumstances. UK retail leases commonly
include clauses requiring the landlord s approval before the
lease can be assigned or sub-let and a user clause restricting the
types of merchandise that can be sold. These tenant s covenants
are the landlord s main means of controlling which retailers
trade in the centre and the mix of merchandise on offer.
Carvalho and Slessenger (1999) describe three cases in which
landlord s tenant mix policies were implemented by means of
lease clauses:
¥ In Chelsfield MH Investments Ltd v British Gas plc [1995] NPC 169 a gas showroom was prevented from being used to
sell electrical appliances. The lease in this case contained a
clause that allowed change of use, but not "for such purposes
as the landlord may reasonably object to on the grounds of
good estate management". The landlord used the clause to
prevent competition with an electricity showroom opposite.
¥ The landlord of much of Regent Street in London refused
consent for a jeweller to assign its lease to a bureau de
change and ticket agency on the grounds of its estate
management strategy. The decision was upheld by the Court
(Crown Estate Commissioners v Signet Group plc [1996] 2 EGLR 200).
¥ Perhaps the most significant of the three cases is Moss Bros. Group plc v CSC Properties Ltd [1999] EGLR 47. The lease
held by Moss Bros. allowed the sale of clothing or other
items approved by the landlord where, in the landlord s
reasonable opinion, their sale was "consistent with the
principles of good estate management having regard to the
particular distribution of trades within the centre". The
landlord refused consent for an assignment to a computer
games retailer and the change of use involved, since its
policy was to concentrate fashion retailers in that part of the
centre. The Court decided that there was a tenant mix policy
in force, albeit unwritten, and the consent for assignment was
reasonably withheld. Under the Landlord and Tenant Act 1988, the landlord was required to show that it had acted
reasonably in refusing consent to assign, in order to prevent
the computer game shop from taking the unit with
detrimental consequences for the tenant mix.
Carvalho and Slessenger (1999) suggest that landlords should
make known any tenant mix policy to facilitate using it as
grounds for refusal of consent to an assignment. They are not
explicit about whether the policy needs to be written, but
suggest it needs to be enforced consistently.
LEASE LENGTH AND SECURITY
During the 1980s UK institutional investors favoured the
income security provided by 20 or 25 year leases to strong
companies. In the context of shopping centres, this meant
letting to strong anchors or national multiple retail companies.
In England and Wales, the Landlord and Tenant Act 1954 gives
retailers security of tenure at lease expiry, should they choose
to remain. As a result, the only opportunities for a landlord to
modify tenant mix would be when a retailer failed, or sought to
surrender the lease, or by the expensive alternative of buying it
out. However, Section 38(4) of the Landlord and Tenant Act
1954 gives the landlord and tenant the opportunity to agree to
opt out of the Act s provisions for security of tenure. This
allows landlords to increase their control over occupation and
thereby the frequency with which tenant mix changes.
During the property recession of the 1990s and the ensuing
change in office business practices, shorter leases became
acceptable to investors in the office and industrial property
sectors. The idea was also accepted that accelerating functional
obsolescence was more easily remedied where landlords used
shorter leases, enabling them to regain control of the building
more frequently. Retailers, however, require at least five years
security over which to write off the sometimes very substantial
costs of fitting out their unit, so that acceptable lease lengths
are longer. There is always a balance to be struck between the
flexibility that can be provided by short leases, opted out of the
1954 Act, and the desire for an income stream secured well
into the future, underpinning the value of the centre as a
financial asset.
The literature review on tenant mix and its management gave
rise to a list of preliminary questions to be addressed by the
research. In the first instance it was necessary to test these ideas
against the practical and expert knowledge of specialists in the
field. The primary research therefore commenced with
interviews with 15 letting agents and retail asset managers, both
in-house and external (see Appendix A). The interviewees were
provided in advance with a list of initial questions. The semi-
structured interviews followed this agenda but interviewees
were encouraged to raise additional issues, which they did.
The interview responses prompted the questions included in the
subsequent questionnaire, which focused the research on the
ongoing management of tenant mix —‘ an issue sparsely dealt
with in the literature. A postal survey was chosen as the most
practical means of data collection within the time constraints.
The survey was sent in June 2000 to investors and asset
managers of 104 UK shopping centres over 25,000 square
metres in size. In many cases the centres were managed in-
house, so that there was no distinction between the two groups
of respondents. The investors included both institutions and
property companies. They were asked to respond only in
respect of the named centre. Thirty questionnaires were
returned, all with useful responses. Figure 1 provides a
breakdown by overall floorspace of the centres for which
responses were received. Appendix B contains a list of the
centres.
The sizes range from 22,480 to 148,650 square metres (242,000
to 1.6 million square feet), with a median of 32,980 square
metres (355,000 square feet). In order to explore possible
differences between responses from larger and smaller shopping
centres, the sample has been split at the median value. This
division is arbitrary, rather than being based on any known
functional divide between size groups, but does provide some
interesting results.
The results of the questionnaire survey were reported to a
workshop held at the British Council of Shopping Centres
(BCSC) National Conference, Glasgow, in November 2000.
Workshop participants were then asked to discuss the issues
raised and report their deliberations. The outcomes are reported
below. This group of retail specialists was self-selected rather
than representative, and may have been individuals with a
particular interest in developing tenant mix management
practice. The group of 40 people included solicitors, retailers
and retail architects, as well as the majority group of retail asset
managers.
Finally, a copy of the draft report was sent to each interviewee
and questionnaire respondent with an invitation to add further
comments. These comments were then incorporated into the
final report.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Research methodology
5S
qu
are
metr
es
Figure 1: Floorspace of respondent shopping centres
200,000
150,000
100,000
50,000
0
RICS Foundation • 12www.rics-foundation.org
The results of the questionnaire survey are reported here,
supplemented by the interviewees observations and the BCSC
workshop reports. Questionnaire respondents were invited to
comment on the issues raised and their comments are reported
where they add substance to the bare statistics.
EVOLVING TENANT MIX
Respondents were asked to distinguish between the importance
of seven considerations that interviewees had identified as
relevant to managing the ongoing evolution of a centre s mix.
Figure 2 shows the responses, and highlights the primacy of
maintaining effective anchors. This is in accordance with the
roles attributed to anchor stores in the literature — positioning
the centre in relation to its competition, dominating shoppers
images of the centre and determining which other retailers can
be recruited and retained there.
Five other considerations are rated as critical or important by a
large majority of respondents. Of these, maximising rental
value and responding to current occupier demand are rated
only marginally higher in score than positioning against other
centres , choosing strong tenant covenants and meeting
unmet consumer demand in the catchment area . Theoretically
this last consideration should be the most important of the five,
since it is the underlying driver of successful tenant mix, giving
rise to ideal competitive positioning and maximising rental
income.
It is interesting that respondents rate responding to consumer
demand less highly than responding to occupier demand , with
only half the number considering the former to be critical.
Occupier demand impinges very directly on managers, as
retailers contact them or their agents, seeking new trading
locations. Consumer demand, on the other hand, is not obvious
and can only be ascertained through research. It may be that
shopping centre managers rely on the detailed demand and
supply research carried out by individual retailers in
ascertaining the viability of new store locations, rather than
themselves analysing the unsatisfied consumer demand in their
centre s catchment area. This is essentially a passive rather than
an active approach to managing tenant mix, and relies on the
retailers expertise, despite the fact that they may have an
imperfect understanding of the tenant mix as a whole.
Two BCSC workshop groups suggested that landlords should
analyse catchment data and pay more attention to demographic
changes, in order to tailor tenant mix to consumer demand.
They envisaged this information being shared with retailers to
ensure that all involved were making decisions based on the
best possible information. However, there were reservations
about the ability of asset managers to interpret such data
without employing retail experts. The benefits of this approach
had also to be balanced against its cost, although some might be
recoverable from retail tenants.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Research results
6
Reflecting local stores and streets
Strong tenant covenants
Meeting unmet demand
Positioning against other centres
Maximising rental values
Current occupier demand
Maintaining effective anchors
Smallercentres
Largercentres
Allcentres
0 0.5 1.0 1.5 2.0 2.5 3.0Average score (0=not applicable 3=critical)
Figure 2: When managing the evolving tenant mix in this shopping centre, what are the most important considerations?
RICS Foundation •13www.rics-foundation.org
The fact that responding to occupier and unmet consumer
demand is scored comparably to maximising rentals suggests
that short-term value maximisation is not widespread. This
concurs with comments by Greenspan (1987), Yap (1996) and
Bernerd (1999) and was reinforced by some interviewees, who
suggested that shareholder pressure for short-term increases in
value had to be balanced against medium to long-term rental
growth potential arising from a well-chosen tenant mix.
However, BCSC workshop groups felt that pressure for short-
term rental growth associated with IPD benchmarking meant
that very few risks were taken in leasing and overall
performance could be damaged. They suggested that freedom
from short-term investment return benchmarking would lead to
more imaginative tenant mix and hence performance in the
longer term — more independent retailers could be included who
could afford to locate in shopping centres only if allowed
concessionary rents.
The low score given to reflecting local stores and streets
suggests that managers of in-town centres are more interested in
competing with other centres than with the surrounding retail
context. There was no difference between the weight given to
this issue by managers of large and small centres, despite the
fact that more small centres are embedded in town centre retail
contexts.
Figure 2 shows the differences in response to this question
between larger and smaller centres. Only positioning against
other centres differs noticeably, being more highly rated for
larger centres, perhaps because they compete over large
geographical areas.
LOCATION OF STORES
As well as the overall balance of retail types within a centre,
the second major ingredient of tenant mix is locating each
retailer in relation to others and to the centre s layout.
Respondents were asked to score issues involved in these
micro-location decisions. Figure 3 shows the responses to the
eight suggested issues, drawn from the literature and the
interviews.
Over 80% of respondents rated management of pedestrian
flows as either critical or important, prioritising it over other
seemingly important issues. The lower scores given to grouping
comparison shops, separating incompatible retailers, and
separating competing stores, seem at first sight to contradict the
importance afforded to these issues in the tenant mix literature.
However, this may be because managers rely on the judgement
of skilful retailers to select or reject individual locations on
these bases and therefore concentrate on the whole centre
issues, which are outside the control of individual retailers and
for which the manager alone is responsible. Certainly the
attribution of the second highest score to good access to
catering is in accordance with this whole centre approach. It
is also likely that floorspace pricing automatically sorts
retailers, rendering the issue of distinguishing primary from
secondary malls relatively unimportant. The low importance
afforded to creating malls for different shopper profiles
suggests that this is a luxury outside the objectives of any but
the largest centres; 22% of respondents considered it did not
apply to their centre at all.
The relatively highly perceived importance of separating
incompatible retailers compares surprisingly to the issue of
grouping comparison retailers, which receives much attention
in the literature and yet is given relatively low importance here.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Manage pedestrian flows
Good access to catering
Separate incompatible retailers
Distinguish primary from secondary
Mall merchandise profiles
Group comparison retailers
Malls for different shopper profiles
Separate competing stores
0 20 40 60 80 100
Figure 3: When deciding where to locate each retailer within the shopping centre, what are the most important considerations?
Minor
Not applicable
Critical
Important
Percentage of shopping centres
RICS Foundation • 14www.rics-foundation.org
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
This analysis brings to mind the case Moss Bros. Group plc v
CSC Properties Ltd [1999] EGCS 47 and others, where
landlords had to defend their comparison retailing cores against
unwanted interlopers seeking to feed off the high footfalls
generated there. The explanation of this apparent anomaly
might then be that comparison retailers recognise their own
kind, relieving managers of having to steer them to the
appropriate location. Other non-comparison retailers seeking to
locate amongst them have to be positively managed into
locations that will enable them to thrive without damaging the
effectiveness of the centre as a whole.
POLICIES FOR MANAGING TENANT MIX
Kirkup and Rafiq (1999) remarked on the variety of
management structures operating in UK shopping centres. A
question aimed at identifying whereabouts in the ownership and
management hierarchy the responsibility for tenant mix policy
lies could have been better designed. Little more can be
inferred from the answers than that there is a hierarchy of
influence. On average, in-house asset managers and investors in
this sample have more influence than do outsourced asset
managers, letting agents and research consultants. Shopping
centre managers have marginally less influence than research
consultants, and principal retailers and anchor tenants are equal
lowest in the hierarchy. These results are unsurprising, except
the equal scores of principal retailers and anchor tenants, where
the latter might have been expected to wield more influence.
This may be a result of the current weakening of traditional
anchors such as Marks and Spencer plc, and the growing
influence of the main space users. This reinforces the
conventional wisdom, rather than the idea forwarded by Peters
(1990) that retailers should lead tenant mix management.
Interviewees varied in their responses to the case of Moss Bros.
Group plc v CSC Properties Ltd [1999] EGCS 47. One
interviewee had subsequently been asked to produce written
policies for the tenant mix of several shopping centres, to
protect against unwanted assignments. These policies used
loosely defined retail categories to avoid a restriction on
assignment depressing rental value. Some interviewees had not
recorded a tenant mix policy to facilitate a defence against
unwanted assignments.
Respondents were therefore asked whether the tenant mix
policy for their centre was formal or informal, written or
unwritten and detailed or outline. Figure 4 shows the
responses. If informal/outline/unwritten policies are
characterised as being less developed and
formal/detailed/written policies are characterised as being more
developed, then it is clear that less-developed policies dominate
the sample. Only 40% of centres have a written policy and
fewer than 30% have a formal one. This would suggest that
some centre mixes may be vulnerable to disruption by
assignment, or that investors may unnecessarily have to go to
some lengths to defend their mix.
Figure 4 suggests that less-developed policies are more
prevalent in smaller centres. Applying a chi-squared test to the
responses shows that the difference between the large and
small centres is statistically significant at the 5% level. This
means that larger centres are more likely to have a well-
developed tenant mix policy, with the possible implication that
smaller centres mixes are more likely to be vulnerable to
disruption by assignment.
Detailed
Formal
Written
Unwritten
Outline
Informal
0 2 4 6 8 10 12 14 16
Figure 4: Please describe the status of the tenant mix policy
Larger centres
Smaller centres
Number of shopping centres
These results must be considered in the light of the finding that
a fifth of respondents were unaware of the Moss Bros. case, as
shown in Figure 5. Figure 6 shows that only 25% of the sample
had increased the formality of their policy following the case.
MONITORING TENANT MIX EFFECTIVENESS
Figure 7 shows the sample s responses to a question about
frequency of review of tenant mix policy. Regular policy review
occurs in only 47% of the sample, 18% quarterly and 29%
annually. Thirty-two per cent of the sample reviewed their
policy at unspecified irregular intervals and 21% relied on
lettings as the occasion for review. Overall, if regular policy
reviews are taken as an indicator of a proactive approach to the
issue, this suggests that 53% of managers are reactive.
According to Greenspan (1987), tenant mix should be
continuously monitored, to diagnose problems and trigger a
proactive management response, ensuring that centre
competitiveness is maintained. In reality, continuous monitoring
may not be practical, but monitoring must be both regular and
frequent.
Interviewees described a continual informal process of
conversations between the on-site centre manager and retail unit
managers, to gather information, including their sales trends.
This is relayed to the asset manager and so contributes to the
process of monitoring tenant mix effectiveness. In some cases
these meetings were carried out to a regular programme.
In addition to this informal information gathering, interviews
and the literature suggested four formal methods of monitoring
the effectiveness of a centre s tenant mix policy and these were
used as a basis for asking respondents about the approach in
their centres. Figure 8 shows the outcomes.
To ensure effectiveness, any method should be used regularly,
whether it is annually, quarterly or monthly. Among the four
methods, regular use is equal lowest for bespoke research and
turnover details, usually collected for calculating turnover rents.
Less than half the sample regularly used these methods. Of the
centres using turnover details, about half do so annually, with
only three centres following Greenspan s advice (1987) to
monitor turnover weekly or monthly. It should be noted that
turnover rents are normal in US centres, but infrequently used
in the UK, so that these details are probably unavailable to
many of the respondent asset managers. This may explain why
nearly half of the sample never used turnover details.
RICS Foundation •15www.rics-foundation.org
Asset managers at the BCSC workshop considered articulating
and communicating tenant mix policy as largely unimportant,
and some believed it could limit flexibility, creating a millstone
for managers. Differences in approach between small local
centres and large regional or super-regional centres were
highlighted by one group who considered sophisticated policy
appropriate for the latter but unnecessary for the former. This
ties in with the picture of policy development revealed by the
sample. Workshop feedback echoed Kirkup and Rafiq (1993)
and Peters (1990), who documented the difficulties of managing
tenant mix at times of recession, when there is pressure to
accept almost any tenant which will pay rent for a hitherto
vacant unit. In such circumstances policy was considered
almost superfluous. Interestingly, the only group in favour of
asset managers communicating a tenant mix policy included
several retailers.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Figure 5: Are you familiar with the decision in the case
Moss Bros v. CSC Properties?
Figure 6: Has the centre’s tenant mix policy become
more formal following the Moss Bros case?
No - 20%
Yes - 80%
Annually
Irregular intervals
Quarterly
Each letting
No - 75%
Yes - 25%
Figure 7: How frequently is this shopping centre’s tenant mix
policy reviewed?
23%
20%30%
27%
RICS Foundation • 16www.rics-foundation.org
Interviewees described setting turnover rents for only a
proportion, for instance 5%, of leases, with market rents for the
others. These are often leases to independent retailers, the
performance of which is difficult to predict and which are
unable to bid competitively against multiples. In these
circumstances turnover rents are a practical form of rent
concession and monitoring them gives the manager warning of
failure. However, in centres where turnover rents are only used
for independents, they are an inadequate tool for monitoring
tenant mix unless supplemented by other methods. Several
centres also use a turnover index, presumably thereby achieving
coverage of all retailers performance. This is indeed the most
frequently used method, with almost half the sample using it at
least every month and nearly two-thirds using it annually or
more often.
Several interviewees said that retailers are unwilling to reveal
details of their turnover, for fear this highly confidential
information may leak to competitors. Turnover indexation is a
more acceptable alternative, based on retailers reports to the
asset manager of turnover variations over time, expressed as
percentage changes. Figure 8 shows that this method of
monitoring retailers performance was used by about two-thirds
of the sample, with almost 50% of managers operating the
system at frequencies of between one and four weeks. One
interviewee reported that the average result of the exercise was
relayed back to tenants to enable them to benchmark their
performance against the others in the centre. This system was
advocated by several of the BCSC workshop groups as the ideal
practice to aim for. However, some expressed doubts that asset
managers had sufficient retailing expertise to utilise fully the
potential of turnover data.
Two respondents ruled out shopper surveys altogether, and eight
carried them out only infrequently. The other two-thirds of the
sample carried them out predominantly annually or quarterly.
Other bespoke research was carried out in all but four of the
sample, but only infrequently in half of these cases. Elsewhere
it occurred predominantly on an annual basis.
Six centres reported monitoring habits which certainly do not
match up to the standard of frequency advocated in the US
context by Greenspan (1987). They used a single method only
at annual frequency or one or two surveys, annually at best. On
the other hand, the remaining 80% of the sample, with two or
more methods used at more than annual frequency, would
appear to have a good chance of noting the need for tenant mix
change.
It seems anomalous that only 47% of the sample reviewed their
tenant mix policy on a regular basis, whereas 80% regularly
collected the data that might indicate a need for policy to
change. This suggests that the data collection does not
automatically initiate a review of policy, but that review often
arises from other stimuli, such as a letting or tenant failure.
IMPLEMENTING TENANT MIX POLICY
Interviews yielded ten major means of implementing tenant mix
policies. Respondents were asked to identify how frequently
they used each one, the results being shown in Figure 9.
The results show user and alienation clauses to be the principal
tools of implementation. However, the literature would suggest
that scores should be as high as four for each one.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Turnover details
Bespoke research
Shopper surveys
Turnover index
0 5 10 15 20 25 30
Figure 8: What methods are used in this centre to monitor the effectiveness of tenant mix policy?
Quarterly
Monthly
Infrequently
Never
Annually
Number of shopping centres
Nonetheless, this suggests that attention should be paid to Moss
Bros. Group plc v CSC Properties Ltd [1999] EGCS 47. Some
interviewees used pre-emption in alienation clauses, to regain
control of units where retailers wanted to leave.
Interviewees agreed that lease lengths were typically fifteen
years, and that retailers resist leases any shorter than five years,
to enable them to write off fitting-out costs fully. Other
interviewees let some units on five-, six- or ten-year terms,
especially those taken by independent retailers and caterers with
less secure covenants and which do not have a proven track
record of successful business. In England and Wales these were
also contracted out of security of tenure, to give the landlord
flexibility to remove them at lease expiry. However, one
managing agent at interview suggested that 99% of shopping
centre leases in England and Wales are within the Landlord and
Tenant Act 1954. Anchor stores are locked in for longer periods
RICS Foundation •17www.rics-foundation.org
since their exit would be disastrous to the centre s success. The
relatively high frequency of amalgamating units, buying out
tenants leases, moving them within the centre and including a
landlord s break clause in the leases, suggests a proactive
approach by landlords. Nearly all interviewees regarded buying
out tenants as the most proactive response to diagnosis of tenant
mix problems, and the natural outcome of monitoring the mix.
Buyouts could be to replace a failing tenant, to introduce an
important destination retailer, and often to amalgamate units to
provide the larger unit sizes increasingly required by such
retailers (Knight Frank 1998).
TENANT MIX OBSOLESCENCE
When asked whether their centre s tenant mix had kept up to
date with modern retail trends, only 46% were sufficiently
confident to answer that it had done so well (34%) or
completely (12%). The answers are illustrated in Figure 10.
0 4 8 12
Figure 10: To what extent has this centre’s tenant mix been able to keep up to date with modern retail trends?
Number of shopping centres
Extend the centre
Concessionary rents
Leases of 10 years or less
Surrenders without premium
Landlord’s break clauses
Poorly
Partially
Fairly
Well
Completely
Move tenants
Buy out tenants
Amalgamate units
Use clauses
Alienation clauses
0 1 2 3
Figure 9: How often are the following means used to implement the tenant mix policy in this centre?
Larger centres
Smaller centres
All centres
Larger centres
Smaller centres
All centres
Average scores (never=0, always=4)
RICS Foundation • 18www.rics-foundation.org
Interviewees thought that the pace of retail change had
accelerated in recent years. They cited as examples the end to
expansion programmes by some anchor stores, the weakened
appeal of middle-market fashion provided by national multiples,
and the growing importance of destination fashion retailers
requiring larger units of 1,000-2,000 square metres. Eighty-two
per cent of respondents considered that the current decline in
the mid-range fashion market had affected their centre s tenant
mix policy, with 11% seeing major changes. The answers
shown in Figure 10 appear to recognise that managing tenant
mix is challenging in such a context. Overall, less than 50% of
respondents thought they had kept up with change well or
completely.
Managers of larger centres in the sample are almost twice as
likely as managers of smaller centres to be confident that they
have updated their tenant mix to keep up with retail trends.
Similarly, managers of smaller centres are almost twice as
likely as managers of larger ones to believe that their centres
have only partially succeeded in keeping up with retail change.
However, a chi-squared test shows that these differences are not
statistically significant at the 5% level.
Six factors hindering tenant mix updating were identified from
interviews and the literature. Respondents were asked to score
them, the results being shown in Figure 11. Few respondents
believed that lack of investment and of proactive management
had hindered tenant mix updating. The perceived inability to
update tenant mix, illustrated in Figure 10, was attributed to
other causes. Inappropriate unit sizes were identified as most
influential, ranked on average as important. Only one
respondent mentioned splitting units, whereas interviewees
agreed that units in older centres are often too small to meet
current demand from fashion retailers, as described by Knight
Frank (1998). Respondents scored lack of vacant units and long
leases equally, as second in importance. The scores attributed to
these two causes support the intuitive interpretation, that there
are infrequent opportunities for changing the mix when units
have been let on long leases. Modern leasing practice, described
by interviewees, may in time alleviate this problem.
Lack of retailer demand is likely to be a problem in failing
centres, whereas lack of vacant units could be seen as a happier
difficulty, enjoyed in successful centres where demand is high.
It is arguable that lack of appropriately sized units, and of
vacant units, could be ameliorated in thriving centres by a
combination of proactive management and investment, buying
out tenants on long leases to amalgamate units and meet current
retailer demand. This solution would only be successful, as
interviewees pointed out, if the short-term cost were justified by
the contribution to overall footfall, and eventually rental values,
of introducing an appropriate destination fashion retailer or
other main space user.
The unanimity between managers of larger and smaller centres
on these factors is perhaps surprising. The only noticeable
difference is in their attitudes to the need for more proactive
management. However, neither group thought this a significant
reason for their tenant mix being less than up to date, and it is a
tribute to the self-awareness of some managers that they are
prepared to admit to it at all.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
0 0.5 1.0 1.5 2.0 2.5
Figure 11: What factors, if any, have hindered updating the tenant mix in this centre?
Average score (not applicable=0, critical=3)
Lack of proactive management
Lack of investment
Lack of retailer demand
Long leases
Lack of vacant units
Inappropriate unit sizes
Larger centres
Smaller centres
All centres
RICS Foundation •19www.rics-foundation.org
Respondents were asked finally whether they thought the
centre s tenant mix would need to change in response to the
growth in e-retailing. 30% foresaw no need for change, 70%
considered it should be only minor and none expected major
change. Several qualified their responses by limiting them to
the short-term, reserving judgement over a longer time frame.
Comments indicated that some retail sectors were believed to
be more vulnerable than others, notably books and CDs.SUMMARY
The success of any new shopping centre depends on the initial
tenant mix, which is dominated by the choice of anchor tenants.
The positioning of the centre in relation to its competition, its
attraction to shoppers and its potential for drawing repeat
patronage are all strongly influenced by the tenant mix.
Retailing in the UK is undergoing significant changes, which
are a challenge to retail asset managers and have the potential to
render obsolete the tenant mix in many centres. Eighty per cent
of respondents thought their tenant mix policy had been affected
by the decline in the mid-range fashion market.
The research shows that many participants in the centre
management hierarchy are involved in meeting this challenge,
but that in 20% of the sample there was doubt that they had
succeeded fully. In a majority of cases the policy was informal,
undetailed and unwritten, despite the need, highlighted in Moss
Bros. Group plc v CSC Properties Ltd [1999] EGCS 47, to
establish a policy as a defence against possible assignments. It
is interesting that the asset managers felt able to assess the
success of their tenant mix policy, despite its nebulous nature;
that nearly 20% were unaware of the Moss Bros. case; and that
only 25% had since increased the formality of the policy.
The importance of maintaining anchor stores is recognised by
asset managers, as it is in the literature. Short-term income
maximisation appears to be balanced against the need to plan a
tenant mix which will add to asset value in the medium to long
term. Management of pedestrian flows is perceived as the main
objective when locating retailers in a centre, and considerations
relating to comparison clusters, lifestyle and merchandise
appear to be seen as less important, perhaps because these are
perceived to be automatically managed by the retailers choices
of affordable and suitable pitch.
Turnover indices and shopper surveys are the main methods
used to monitor the success of tenant mix policy. In a small
minority of cases monitoring appears to be both irregular and
infrequent, but 80% of the sample appear to have a good chance
of noting the need for tenant mix change with two or more
methods used at more than annual frequency.
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
Summary and conclusions
7
RICS Foundation • 20www.rics-foundation.org
Policy review appears to be more irregular and often depends
on stimuli such as tenant change. Despite the suggestion that
some asset managers could be more proactive, the incidence of
tenant buyouts, amalgamation of units, moving tenants and
operating landlords break clauses suggests that many are
energetically adjusting their tenant mix to respond to changing
retail circumstances. The main hindrances are perceived to be
inappropriate unit sizes, lack of vacant units and long leases.
Lack of investment and of proactive management are not
considered to be a problem, although arguably a combination of
investment and proactive management could overcome the
problems that were identified.
It is not possible to ascertain from this type of study the degree
to which asset managers are succeeding in managing tenant mix
in a period of rapid and significant change in retailing. The
study does, however, provide an overview of the objectives and
methods of tenant mix management that asset managers can use
in assessing their own effectiveness. A larger sample might have
provided opportunities for better differentiating practice
between different types of centres, which was suggested by
interviewees. Resource-consuming methods may not be
considered a worthwhile investment when the potential for
increasing value is limited by size and catchment.
THE FUTURE DIRECTION OF TENANT MIX
MANAGEMENT
Tenant mix determines the success of centres as shopping
destinations, so tenant mix management is fundamentally
important to shopping centres. The traditional property asset
approach to shopping centres tends to be remote from the
customers who are the centre s lifeblood. It is also too
conservative.
Shopping centres would be more effectively managed as retail
businesses, based on the marketing concept of business. To
achieve this, centres need to be more in touch with:
¥ national consumer trends
¥ national retailer trends
¥ consumers and trends in the catchment area
¥ shoppers visiting the centre
¥ tenants in the centre
To avoid creeping tenant mix obsolescence, management needs
to become more proactive, responsive and flexible. To achieve
this, centres should have:
¥ an ongoing programme of monitoring key sources of
information
¥ an explicit direction, though subject to review, based on
thorough research
¥ a marketing strategy with priority targets and a clear message
¥ a greater willingness to risk investment tactically to achieve
higher returns
¥ a conscious programme of annual improvement
Shopping centre management needs to evolve away from the
negative battle of landlord versus tenant, towards more modern
and positive forms of partnership. Initiatives to achieve this
could include:
¥ more openness between the parties, based on shared goals
¥ pooling of research on the catchment area
¥ more frequent opting out of the Landlord and Tenant Act 1954 (England and Wales)
¥ shorter lease lengths
¥ more use of turnover rents
¥ an understanding that underperforming retailers will be
assisted, but must leave if they cannot improve
FUTURE RESEARCH
In order to move towards this vision of shopping centre
management with its potential for tenant mix improvement,
research is needed into the feasibility of the following areas:
¥ A large amount of data is collected and relied on by retailers
and centre asset managers. How can this be assembled and
managed collectively, cutting out duplication and contributing
to a shared understanding of the trading context of a centre,
in order to facilitate continual tenant mix updating?
¥ What constitutes a marketing strategy for a shopping centre
and its tenants? How should such a strategy be formulated
and implemented?
¥ How can centres make the transition from a traditional long
lease/security of tenure pattern of lettings, to a more flexible
and responsive business approach, which could provide the
context for evolving an optimum merchandise mix?
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
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Appendix A Appendix B
www.rics-foundation.org RICS Foundation • 23
MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM
LIST OF INTERVIEWEES
Jenefer Greenwood CB Hillier Parker
Graham Chase Chase and Partners
Kay Chaldecott Capital Shopping Centres
Jerry Winter Churston Heard
Mark Williams DTZ Debenham Tie Leung
Sarah-Jane Curtis Grosvenor Estate
John Strachan Healey and Baker
Yvonne Court Healey and Baker
Justin Taylor Healey and Baker
Keith Redshaw Land Securities
Ian Pearson Lamb and Edge
Paul Cawood Lambert Smith Hampton
Keith Stone Lendlease
Rob Wingrave Lunson Mitchenall
Gordon Gabbani MEPC
Bob Fletcher Sanderson Townend & Gilbert
SHOPPING CENTRES THAT RESPONDED TO
THE SURVEY
Arndale Centre, Eastbourne
Arndale Centre, Wandsworth, London
Blackburn Centre, Blackburn
Bluewater, Dartford
Brent Cross, London
Broadmarsh Centre, Nottingham
Buchanan Galleries, Glasgow
Buttermarket, Ipswich
Castle Mall, Norwich
Churchill Square, Brighton
Cleveland Centre, Middlesbrough
Eastgate Centre, Gloucester
Ellesmere Centre, Manchester
Elmsleigh Centre, Elmsleigh
Frenchgate, Doncaster
Harvey Centre, Harlow
Kirkgate Centre, Bradford
Market Place, Bolton
Marlowes, Hemel Hempstead
Meadowhall, Sheffield
One Stop, Perry Bar
Priory Meadow, Hastings
Spindles, Oldham
St Enochs Centre, Glasgow
Swan Walk, Horsham
Telford Centre, Telford
The Fort, Birmingham
The Malls, Basingstoke
The Walks, Basingstoke
Whiteleys, London